Opinion » Editorial

Electrolux Deal: Time to Rethink the Industrial-Development Process


The catastrophic news late last week of the imminent closing of the Electrolux plant at Pidgeon Industrial Park underscored the importance of long-overdue efforts currently underway to examine the incentives policies employed locally to recruit industry and, more generally, to reform the industrial development process.

It was not even a decade ago that the announcement was made, in mid-December 2010 at a gala year-end Chamber of Commerce banquet at the Peabody, that the giant Swedish appliance manufacturer would be building a 700,000-square-foot installation on Presidents Island. Numerous luminaries were present, including Electrolux executives, Mayors A C Wharton and Mark Luttrell of Memphis and Shelby County, respectively, and then-Governor Phil Bredesen.

Bredesen said the enterprise would represent a $190-million investment and would bring some 1,200 jobs, in addition to supplier jobs and other ancillary benefits. The facts, as things turned out, were a little different: The supplier jobs never really developed; the ancillary benefits remained theoretical; the job numbers totaled out at 1,100 and had subsided to roughly half that number at the time of last week's announcement; and only the $190-million investment turned out to be entirely real.

Except that $190 million was the amount paid out by local and state taxpayers, not a measure of bounty to be received by the local economy. And, most worrisome of all, there was no "clawback" provision in the contract with Electrolux mandating that the company would be liable to refund any of this investment in the case of any default in its commitment to Memphis, Shelby County, and Tennessee, all of whom played the role of marks in this one-sided transaction. All that Electrolux had consented to do by way of recompense is to pay the standard tax rate, deferred to this point, for the remaining year or so the plant will be doing business in Shelby County.

How could such a deal have been made? To be sure, all the governmental principals had reasons. A basic fact of life for an elected official is the need to demonstrate results. The two mayors were facing elections, the exiting Bredesen was understandably eager to crown his gubernatorial legacy, and for the then-incoming Governor-elect Bill Haslam, who gave the project his approval, it no doubt had the looks of a godsend on a platter.

For current Memphis Mayor Jim Strickland, who was a member of the city council that gave the deal its blessing, it must look now like a joke at his expense. The Electrolux deal was not of his making, but it is a setback that may count against him in his reelection campaign. It is not to his advantage that his own explanations for the debacle dovetail with the company's: a troubled economy, blowback from Trump tariffs, the going belly-up of Electrolux super-customer Sears.

All of that may be so, but none of it explains the embarrassing and costly predicament facing Memphis and Shelby County now. The fact is, our civic guardians undertook an enormous gamble without elementary protection. They bet on the come — and it came and went.

Any valid reform of our industrial recruitment process must include safeguards against any possible recurrence of this disastrous deal.

Keep the Flyer Free!

Always independent, always free (never a paywall),
the Memphis Flyer is your source for the best in local news and information.

Now we want to expand and enhance our work.
That's why we're asking you to join us as a Frequent Flyer member.

You'll get membership perks (find out more about those here) and help us continue to deliver the independent journalism you've come to expect.

Add a comment